When employers in Mississippi draft employment agreements, non-compete agreements are often inserted to protect IP and trade secrets. They prevent the employee from working for a competitor if they leave.
However, a proposal by the U.S. Federal Trade Commission (FTC) to ban employers from imposing restrictive non-compete agreements on their workers has led to state jurisdictions increasingly limiting their use.
Let’s look at what this might mean for employers and employees in Mississippi, and the alternatives to non-compete agreements that are worth considering.
Potential issues with non-compete agreements
Traditionally, businesses have protected their intellectual property and trade secrets by restricting the employment options for departing employees.
However, broad, and highly restrictive non-compete clauses may unfairly limit workers’ abilities to boost earnings and develop their careers. They may also stifle innovation, which would be detrimental to the broader business economy.
The over-use of non-competes, therefore, has brought them into the “firing line”, with some companies using such clauses even for relatively unskilled positions.
Non-compete clauses are still valid and enforceable in Mississippi. However, they must meet strict “reasonableness” standards in duration, geography, and scope to protect legitimate business interests like trade secrets or customer relationships. The courts scrutinize agreements closely on a case-by-case basis if challenged legally, as no specific statute governs them.
The potential issues with non-competes are causing some Mississippi employers to seek alternatives.
Anti-non-compete laws in the US
California, North Dakota, Oklahoma, Washington, D.C., and Minnesota have enacted comprehensive bans on non-compete agreements for employees. These prohibit non-compete agreements outright, except in limited cases, like business sales. Other states, like Colorado, Illinois, Maine, Maryland, etc., have prohibited their use for workers paid under a certain salary threshold.
The rising trend to curtail non-competes may see Mississippi follow suit in the future, although no legislation proposes statewide limits, bans, or wage thresholds at present. As mentioned, however, courts will scrutinize employment contracts closely if challenged.
Alternatives to non-compete agreements
Employers should consider the following types of clauses if they are concerned about the legal enforceability of non-compete agreements:
Non-disclosure agreements (NDAs)
Non-Disclosure Agreements (NDAs) require employees to keep sensitive, confidential information private and not disclose it to those outside the business. They are widely used in Mississippi and other jurisdictions as alternatives to non-competes.
If reasonable, NDAs effectively protect trade secrets, business processes, client information, and strategic plans. Employers must specify all information considered “confidential”, the duties of employees, and the effective dates of the NDA.
Non-solicitation agreements
Non-solicitation agreements protect businesses by preventing departing employees from approaching their clients, customers, and employees after leaving the company.
Such agreements do not prevent employees from working in the same sector but, instead, seek to protect the company’s client base and internal teams. They must specifically detail what constitutes “solicitation”, who the employee must not solicit, and the duration of the restrictions.
“Garden leave” clauses
With “Garden leave” clauses, employees must stay away from work during their notice period but remain on the payroll and receive benefits.
These agreements are often seen as a “win-win”, as the employee gets paid but cannot immediately join a competitor, start a competing business, or obtain additional IP from the company. They also provide time for the company to manage the transition process.
Training repayment agreements
Training repayment agreements are designed to reimburse a company for the costs of training an employee if that employee leaves within a certain period after the training.
Such agreements are particularly attractive for companies that must invest in considerable training requirements for employees, but the terms of repayment must be clearly stated to be legally enforceable.
Invention or IP assignment agreements
Invention assignment agreements state that any inventions, designs, or creations made during the employee’s time at the company remain the property of the employer. This applies to patents, copyrights, or trade secrets developed during the period of employment. The precise IP and employee requirements (such as disclosing inventions) should be specified in the agreement.
Other restrictive covenants
Other restrictive covenants besides the ones already covered include:
- Non-disparagement clauses, which prohibit employees or former employees from making derogatory or negative statements about the company.
- Non-interference clauses, which prevent employees from interfering with a company’s contracts or other relationships with its customers, suppliers, partners, etc.
How can employees prepare for non-compete litigation?
What should you expect as an employee if you are the subject of non-compete litigation or threatened with it by a former employer because of your employment activity after leaving?
A formal complaint may be filed in state or federal court, and a motion filed for a temporary restraining order (TRO) or preliminary injunction. If the courts believe you are actively violating an enforceable agreement, you may be threatened with a TRO and monetary penalties—but proper preparation can help prevent that.
Do not ignore any cease-and-desist letters sent by your ex-employer. Instead, start preparing by obtaining copies of your signed employment agreement and any non-compete, non-solicit, or confidentiality provisions. Then, ensure you have your termination letter or separation agreement and any emails concerning the matter. Next, get your job offer or contract from your new employer and inform them of the legal case against you.
Then, seek a consultation with a qualified non-compete attorney, who will help you resolve matters either by liaising with your ex-employer through negotiation, mediation, or by presenting a defense in court.
Possible defenses in non-compete litigation
If the matter heads to court, your non-compete lawyer may argue one of the following defenses:
- Overly broad contract: The restriction covers too much time, space, or activity.
- Lack of consideration: Your employer requested that you sign the agreement after starting work, without added compensation.
- Employer misconduct: The employer was guilty of wage theft, discrimination, bad faith termination, etc.
- No legitimate interest: Your role didn’t involve access to trade secrets or specialized knowledge.
- Public harm: Enforcing the clause would deny critical services (such as in healthcare or technology).
The precise defense used will depend on the circumstances, which can be discussed during an initial consultation.
For legal advice and litigation assistance with non-compete agreements or any other contractual matter in the Biloxi area of Mississippi, contact a lawyer at Rushing & Guice, PLLC.
